No. 125 Brgy.

San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

ICARE BATCH 5
Advanced Financial Accounting & Reporting
Final Preboard

1. Statement 1: Control over the consigned merchandise transfers from the consignor to the consignee.
Statement 2: The consignor acts as an agent on behalf of the consignee for the purpose of selling
merchandise for a commission.
A. Only the first statement is true.
B. Only the second statement is true.
C. Both statements are true.
D. Both statements are false.

2. Which of the following is not a possible estimation approach of the stand-alone selling price of a
performance obligation when the stand-alone price is not directly observable?
A. Expected cost plus margin approach
B. Current market assessment approach
C. Residual approach
D. Fair value approach

On December 31, 2022, POKEMON Corporation enters into a business combination by acquiring all
the assets and assuming all the liabilities of SUPER MARIO Corporation in which the latter will be
dissolved. POKEMON’s considerations of the following:
 Cash payment of P1,977,500
 60,000 unissued shares of its P100 par ordinary shares with a market value of P101 per share.
 6% P2,000,000 bonds payable.
 A contingent payment of P1,500,000 cash on December 31, 2019 if the cash flows from
operations during the 2-year period 2022-2019 exceed P2,500,000 per year. POKEMON
estimates that there is a 40% chance of probability that the P1,500,000 will be required.

In addition, POKEMON paid the following at the time of the merger:

Finder's fee P110,000
Diligent audit prior to business combination 75,000
SEC registration cost 125,000
Cost of printing and issuing stock certificates 25,000
General and administrative salaries attributable to the merger 75,000

Statements of financial position for the two companies as of December 31, 2022 before the merger
follow:
POKEMON SUPER MARIO
Corporation Corporation
Book Fair Value Book Value Fair Value
Value
Cash P2,950,000 P2,950,000 P720,000 P720,000
Receivables 1,200,000 1,200,000 900,000 900,000
Inventories 2,400,000 2,500,000 1,500,000 1,750,000
Land 3,000,000 3,200,000 3,000,000 3,100,000
Building, net 12,000,000 10,000,000 5,500,000 4,500,000
Equipment, net 2,000,000 2,000,000 900,000 950,000
Goodwill 750,000 750,000 50,000 -
In progress research and development - - - 50,000
Total P24,300,00 P12,570,000
0

1|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

Accounts payable P3,600,000 P3,750,000 P1,120,000 P1,200,000

Accrued expenses 1,500,000 1,100,000 880,000 900,000
Share capital, P100 par 10,000,000 5,000,000
Share premium 4,200,000 2,500,000
Retained earnings 5,000,000 3,070,000
Total P24,300,00 P12,570,000
0

3. What is the amount of goodwill to be recognized on the acquisition date?

A. P767,500
B. P1,067,500
C. P1,217,500
D. P1,217,500

4. What is the amount of total assets immediately after the merger?

A. P34,332,500
B. P34,650,000
C. P34,687,500
D. P34,650,000

5. What is the amount of the total liabilities immediately after the merger?
A. P9,537,500
B. P10,990,000
C. P9,800,000
D. P9,787,500

6. What are the amounts of (1) share premium and (2) retained earning immediately after the merger?
A. P4,110,000; P4,740,000
B. P4,740,000; P4,110,000
C. P4,050,000; P4,650,000
D. P4,650,000; P4,050,000

Na-tila Sweets Company manufactures a Kobunut candy, Kobu, which is sold for P5.00 a box. The
manufacturing process also results in a by-product Huskar. Without further processing, Huskar sells for
P1.00 per pack, with further processing it sells for P3.00 per pack.

During the month of October, the total joint manufacturing costs up to the point of separation consisted of
the following charges to work-in-process:
Raw materials P225,000
Direct labor 100,000
Factory overhead 45,000

During the month, the production for the two products was as follows: Kobu, 591,000 boxes; Huskar, 45,000
packs.

The following additional costs are necessary for further processing to complete Huskar, in order to obtain a
selling price of P3.00 per pack, during the month of October:
Raw materials P30,000
Direct labor 22,500
Factory overhead 7,500

2|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

7. Assuming that the by-product Huskar, is further processed and then transferred to the stockroom at net
realizable value with a corresponding reduction of Kobu’s manufacturing costs, the journal entry would
be:
A. By-product Inventory – Huskar 45,000
Work in Process – Kobu 45,000

B. By-product Inventory – Huskar 135,000

Raw Materials 30,000
Direct Labor 22,500
Factory Overhead 7,500
Work in Process – Kobu 75,000

C. Work in Process – Huskar 6,750

Work in Process – Kobu 6,750

D. By-product Inventory – Huskar 60,000

Raw Materials 30,000
Direct Labor 22,500
Factory Overhead 7,500

Chino Company has a cycle of 3 days, uses a Raw and In Process Account (RIP) and charges all conversion
costs to cost of goods sold. At the end of each month, all inventories are counted, conversion costs
components are estimated and inventory account balances are adjusted. Raw material cost is backflushed
from Raw and in Process (RIP) Account to finished goods. The following information is provided for the
month of June:
Beginning Balance of RIP account, including P2,000 conversion cost P10,000
Beginning Balance of finished goods account including P12,000 conversion cost 20,000
Raw materials received on credit 800,000
Direct labor cost 600,000
Factory overhead applied 1,000,000
Ending RIP inventory per physical count, including P14,000 conversion cost 40,000
Ending finished goods inventory per physical count, including P8,000 conversion cost 12,000

8. What is the amount of conversion cost included cost of goods sold in June?
A. P1,604,000
B. P1,592,000
C. P1,588,000
D. P1,600,000

9. What is the amount of direct materials backflushed from RIP to finished goods?
A. P782,000
B. P808,000
C. P774,000
D. P790,000

10. What is the amount of direct materials backflushed from finished goods to cost of goods sold?
A. P790,000
B. P800,000
C. P786,000
D. P778,000

ABC Corporation has provided data concerning the company’s Manufacturing Overhead account for the
month of July. Prior to the closing of the over-applied or under-applied balance to Cost of Goods Sold, the
total of the debits to the Manufacturing Overhead account was P72,000 and the total of the credits to the
account was P77,000.

3|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

11. Which of the following statements is true?

A. Actual manufacturing overhead for the month was P72,000.
B. Manufacturing overhead for the month was under-applied by P5,000.
C. Manufacturing overhead applied to Work in Process for the month was P72,000.
D. Manufacturing overhead transferred from Finished Goods to Cost of Goods Sold during the
month was P77,000.

12. Which of the following foreign currency denominated items if translated to entity’s functional currency at
the end of reporting period might result to foreign currency gain or loss?
I. Unearned revenue
II. Investment property under fair value model
III. Inventory
IV. Sales
V. Income tax payable

A. II and V
B. III and IV
C. V only
D. I and V

Silencer Co., a Philippine corporation, sold inventory on December 1, 2022, with payment of 10,000 foreign
currencies (FC) to a foreign customer to be received in sixty days. The pertinent exchange rates were as
follows:
Date Spot Rate
Dec. 1 P1.7242
Dec. 31 P1.8182
Jan. 30 P1.6666

13. For what amount should Sales be credited on December 1?

A. P5,500
B. P16,949
C. P18,182
D. P17,242
E. P16,667

14. What amount of foreign exchange gain or loss should be recorded on December 31?
A. P300 gain
B. P300 loss
C. P0
D. P940 loss
E. P940 gain

15. What amount of foreign exchange gain or loss should be recorded on January 30?
A. P1,516 gain
B. P1,516 loss
C. P575 loss
D. P500 loss
E. P500 gain

16. Agency M have an obligation for the construction of 10-storey building along EDSA upon signing of
contract amounting for P100,000,000, the entry to record this transaction would be
A. No entry
B. Debit Building; Credit Accounts Payable
C. Debit Building; Credit Cash – NT, MDS

4|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

D. Memo entry – RAOCO

17. Which of the following is NOT an example of one of the major categories of funds for a college or
university?
A. Current Funds
B. Proprietary Funds
C. Plant Funds
D. Trust and Agency Funds

Doctor Woo, a non-profit hospital affiliated with RCF College, had the following cash receipts for 2022:
Patient service revenue P1,500,000
Contribution from donor to be invested indefinitely (endowment fund) 500,000
Tuition fees from nursing school 100,000
Dividends received from permanent investments 160,000

The dividends received are restricted by the donor for hospital building improvements. No improvements
were made during 2022.

18. In the hospital’s statement of cash flows for 2022, what amount would be included in the net cash
provided (used) by operating activities?
A. P1,760,000
B. P1,600,000
C. P2,100,000
D. P1,500,000

19. Under IAS 27, if the parent corporation prepares separate financial statements, which of the following
statements concerning the three alternative methods of accounting for investment in subsidiary is true?
A. Under fair value model, dividend income from subsidiary shall not be recognized by the parent
corporation because it shall be eliminated.
B. Under cost model, share in net income of subsidiary shall be recognized by the parent
corporation.
C. Under equity method, dividend income from subsidiary shall be recognized at the date of
declaration by the subsidiary corporation’s board of directors.
D. Under equity method, gain or bargain purchase shall be recognized by the parent corporation at
the date of acquisition if the consideration given up is less than the fair value of net asset
acquired.

20. A partner is retired in an existing partnership. After his retirement, the capital balance of the remaining
partners increased. If the retiring partner receives more than his capital balance before the retirement,
which of the following is the valid reason.
A. Impairment loss has been recognized before retirement.
B. Asset revaluation has been recognized before retirement.
C. The retiring partner gave bonus to remaining partners.
D. The remaining partners gave bonus to retiring partners.

X and Y have capital balances of P150, 000 and P180, 000, respectively. Z is to invest P60, 000 for 15% in
the partnership interest and also in the profit and loss. There is an undistributed net income in the amount of
P80,000. Partners X and Y share profit and loss 65:35.

21. How much is the capital credit of Z upon his admission?

A. P60,000
B. P61,500
C. P72,000
D. P70,500

5|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

22. How much is the bonus to partner X from partner Z?

A. P10,500
B. P6,825
C. P0
D. P3,675

JCA Partnership is entering into liquidation and you are given the following account balances:
Cash P775,000 Liabilities P1,100,000
Noncash asset 6,750,000 Loan from A 150,000
J, capital (20%) 1,275,000
C, capital (20%) 1,625,000
A, capital (60%) 3,375,000
Total Asset P7,525,000 Total Liabilities and Capital P7,525,000

During June, noncash asset with a book value of P1,875,000 were sold for P1,600,000. JCA paid P175,000
for the liquidation expenses it incurred and it also paid its liabilities to outsider creditors. However, creditors
whose account balances amount to P150,000 decided to condone JCA’s liabilities. ¾ of the cash received
from the sale of noncash assets were distributed to the partners.

23. What is J’s share in the maximum possible loss?

A. P965,000
B. P975,000
C. P985,000
D. P995,000

24. What is A’s interest after the first cash distribution?

A. P2,805,000
B. P2,905,000
C. P2,955,000
D. P3,105,000

25. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership
A. Partnership drawings, partnership liabilities, partnership loans, partnership capital balances
B. Partnership liabilities, partnership loans, partnership capital balances
C. Partnership loans, partnership liabilities, partnership drawings, partnership capital balances
D. Partnership liabilities, partnership capital balances, partnership loans

26. Which of the following is correct?

Statement 1: Control is the power to govern the financial and operating policies of an economic activity so
as to obtain benefits from it.
Statement 2: Parties in the joint arrangement does not include those investors that has no joint control in
the arrangement.
a. I only c. Both statements are correct
b. II only d. Both statements are incorrect

27. Anton Manufacturing Company uses processing costing method for its two department to produce a
product. The following data were taken from the books for the month of August.

Department 1 Department 2
Units:
WIP beg. ? 10,000
Stage of Completion 75% 50%
Started in process 35,000 ?
Complete and Transferred 40,000 42,000
In process end 10,000 ?
Stage of Completion 80% 90%
Costs:
Last Period Costs
Materials 156,875 40,000
Conversion Costs 65,000 80,000
Transferred in - 65,000

6|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

This Period Costs:

Materials 463,750 770,400
Conversion Costs 532,875 707,200
Transferred in - ?

 In department 1 all materials were added at the start of the process.

 In Department 2 40% of materials were added at 20% completion; additional 20% of materials were
added at 60% completion and the balance at the end of the process.
 The conversion costs were applied evenly throughout the process. The entity uses FIFO method
inventory flow.

What is the amount of work in process ending costs in Department 2?

a. P403,767 c. P201,600
b. P395,600 d. P205,835

28. What is the amount of completed and transferred costs in Department 2?

a. P2,237,000 c. P2,248,494
b. P1,864,000 d. P1,907,964

29. ABC Inc. has a process costing system in its operation and uses weighted average inventory method
for its inventory cost flows. The following information for the assembly department obtained from the
accounting records for the month of August.

Units
WIP beg, 100,000 (75% incomplete)
Transferred in during the month 250,000
WIP end 50,000 (50% complete)

Costs Transferred in Materials Conversion

WIP beg 200,000 92,500 12,500
This Period 627,500 306,000 166,250

The entity applies all materials at the start of the process

What is the total unit cost?
a. P3.15 c. P3.37
b. P1.31 d. P3.67

30. Which of the following is not relevant in determining weighted average unit cost in process costing?
a. Cost of beginning inventory.
b. Equivalent unit production in beginning inventory.
c. Equivalent unit production in ending inventory.
d. Units completed.

31. Standard costing can be used in:

a. Only in process costing
b. Only in job order costing
c. Either process or job order costing
d. None of the above

32. ABC Inc. produced Tac, Tec and Tic the following products from a joint process. The joint costs are
allocated to the following products. The relevant data for the month of December shows:

Tac Tec Tic Total

Units produced 50,000 40,000 10,000 100,000
Joint Costs ? ? ? 450,000
Sale Value at SO 420,000 270,000 ? 750,000
Separable Cost 88,000 30,000 12,000 130,000
Final Sales Value if processed 538,000 320,000 78,000 936,000

What is the joint cost allocated to product Tac using the relative sales value method?
a. P252,000 c. P420,000
b. P450,000 d. P750,000

7|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

33. ABC Company produced three products at a joint cost of P350,000. Two of these products were
processed further. The production and sales data were:

Product Units Produced Sales Additional Processing Costs

X 1,050,000 857,500 700,000
Y 350,000 105,000 -
Z 350,000 612,500 350,000

Assuming product Y is a by-product whose sale value is credited to the joint production costs. If the net
realizable value is used, how much of the joint production costs is allocated to product Z?
a. P153,125 c. P218,750
b. P136,112 d. P175,000

34. ABC Inc. Job 201 for the manufacture of 5,000 bags was completed during 2030 at the following unit
costs:

Direct Materials 25
Direct Labor 16
Factory Overhead (Includes an allowance of P2 for spoiled work) 15

Final inspection of Job 201 reveals 200 spoiled bags which were sold to for P8,000 and 50 defective bags.
The defective bags were reworked at a total cost P32,000.

What is the unit cost of good units produced on Job 201, assuming it manufactures the bags to the
exacting specification of the job?
a. P61.25 c. P63.33
b. P54 d. P58.80

35. What is the unit cost of good units produced on Job 201, assuming the cost associated with spoilage
and reworked units is considered normal to manufacturing operations?
a. P56 c. P58.80
b. P54 d. P61.25

36. The STU Company manufactures toys. One order from Mr. ABC for 5,000 units showed the following
costs per unit:

Direct materials P3.50

Direct labor P1.25

Manufacturing overhead at 140% of direct labor cost if defective work is charged to the job, 150% if it is
not. Final inspection revealed that 250 of the units were improperly manufactured. These units were
disassembled, and properly manufactured. The per unit cost of correcting the defective products consists
of P0.15 for materials, P0.25 for direct labor; and manufacturing overhead at the predetermined rate.

What is the cost per unit produced, assuming that the rework costs is charged to the specific job, Mr.
ABC?
a. P6.5375 c. P6.6250
b. P6.5385 d. P7.2500

37. What is the cost per produced, assuming that the rework costs is charged to Factory overhead
Control?
a. P6.8250 c. P6.5375
b. P6.6250 d. P7.4000

38. Which of the following statements is/are correct?

Statement 1: Just in time manufacturing favors organizing work around products rather than around
processes.

Statement 2: In just in time environment, raw materials are delivered less frequently than in a traditional
environment.
a. I only c. I and II
b. II only D. None of the Choices

39. What do just in time manufacturer’s demand from their vendors?

I. High quality materials II. Low cost materials III. On time deliveries

a. II and III c. I and II

b. I and III d. I , II and III

8|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

40. ABC Corp. employs process costing system. A unit of product passes to two departments before it is
completed. The information regarding Department 1 follows:

Quantity data Units

Work in process, beg. (45% completed) 10,000
Work in process end. (75% completed) 6,000
Started in production 80,000
Spoiled units 2,500

Costs Data
Work in process, beg.
Materials 12,000
Conversion Costs 28,000

This Period Costs

Materials 90,000
Conversion Costs 250,000

Raw materials are added as follows: 20% at the start of the process, additional 10% when it is 30%
complete, additional 40% when it is 70% complete and the remaining when it is 90% complete. The
conversion costs was applied evenly throughout the process. The company usually experienced a 2% loss
based on completed units. The company’s inspection point is at 60% completion.

The equivalent units of production of materials using FIFO method is:

a. 86,450 c. 79,450
b. 83,450 d. 84,200120

41. What is the unit cost of materials using weighted average method?
a. P0.46270 c. P0.32389
b. P0.45740 d. P0.45872

PARTNERSHIP
42. John and Paul formed a partnership on October 31, 2023. The partners agree that John will
contribute his his sole proprietorship business while Paul will contribute P100,000 cash and an
equipment with book value of P800,000 and fair value of P750,000.. The statement of financial
position of John is shown below:

Cash 240,000 Accounts Payable 300,000

Notes receivable 150,000 Notes Payable 630,000
Accounts receivable 900,000 John, capital 1,080,000
Allowance for Doubtful Accounts (60,000)
Inventory 240,000
Furniture’s and Fixtures 720,000
Accumulated Depreciation (180,000)
Total 2,010,000 Total 2,010,000

They also agree on a 60:40 profit and loss ratio and the following adjustments will be made on the books
of John.
 The inventory is to have an appraised value of 250,000 as per independent appraiser chosen by
partners.
 The allowance for doubtful accounts should be 10% of the accounts receivable.
 Interest of 6% accrued on notes receivable. The note is dated July 1, 2023.
 Interest of 10% accrued on notes payable. The note is dated March 31, 2023.
 The furniture’s and fixtures are 1/3 depreciated.
 The accounts payable is not assumed by the partnership.

What is the capital of John after formation of the partnership?

a. P1,305,750 c. P1,320,750
b. P1,326,250 d. P716,250

43. Assuming the partners agreed to have a 55:45 profit and loss ratio. How much should be the
additional cash investment or withdrawals of Paul so that their capital balances conforms to their
profit and loss ratio?
a. P(263,977) c. P218,341
b. P230,614 d. P235,114

9|P a g e RFERRER/ATAN G/PDEJESUS

 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

44. Mama, Fely and Shey formed a partnership and contributed cash of P950,000; P1,100,000 and
P900,000, respectively. Mama, Fely and Apple are partners sharing profits and losses on a 4:4:2 ratio,
respectively. The net income after allocation of salary and bonus allowances amounted to P440,000.
The partners agreed to receive the following:
1. Salaries allowances of P100,000 and P120,000 shall be paid to partners Mama and Apple,
respectively.
2. Interest based on that portion of the partner’s contribution in excess of P800,000. The interest is
treated as expense.
3. Partner Apple is to receive bonus of 12% of net profit before bonus but after salary.

The total share of Apple in the net income of the partnership is:

a. P285,500 c. P275,500
b. P195,120 d. P268,000

45. ABC Company is entering into liquidation and you were given the following account balances:

Cash 150,000 Accounts payable 250,000

Non-Cash Assets 1,200,000 Bryan, Loan 10,000
Amiel, loan 20,000 Amiel, capital (20%) 400,000
Bryan, capital (50%) 350,000
Chris, capital (30%) 360,000
Total 1,370,000 Total 1,370,000

During August, non-cash assets with book value of P800,000 were sold for P625,000. The company paid
liquidation expenses amounting to P30,000 and it paid 150,000 of its liabilities to outside creditors.
Creditors whose account balances amounts to P20,000 decided to condone the company’s liability and
P500,000 were distributed to partners.

What is the total interest of Chris after the first installment cash distribution?
a. P180,000 c. P156,000
b. P177,000 d. P124,500

46. Which of the following statements is/are correct?

Statement 1: Investors that holds only protective rights can have power over an investee in exceptional
cases.
Statement 2: Intragroup transactions and balances must be cancelled.
a. I only c. Both statements are correct
b. II only d. Both statements are incorrect

47. Anna and Faye are partners who share profits and losses in the ratio of 6:4. On March 1, 2032 the
following data are available from the books of the partnership.

Cash 80,000 Accounts payable 280,000

Accounts receivable 120,000 Anna, capital 300,000
Inventory 300,000 Faye, capital 500,000
Equipment, net 500,000 Anna, drawings (50,000)
Faye, drawings (30,000)
Total 1,000,000 Total 1,000,000

The net income of the partnership prior to admission of Shine is P50,000. Also the partners agreed to
revalue the inventory to P320,000 and equipment to P530,000. Shine is to be admitted for 25% interest in
the partnership by direct purchase from the partners for P250,000.

What is the amount received by partner Faye from the P250,000 paid by Shine?
a. P127,500 c. P104,500
b. P145,500 d. P77,500

10 | P a g e RFERRER/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

NPO
48. On December 31, 2020, the following expenditures were made by TAKUSA, a society for protection of
battered husband.

Printing of annual report 50,000

Unsolicited merchandise sent to encourage contributions 60,000
Shelter services provided for battered husband 100,000
Cost of an audit by a CPA 20,000
Packed goods given to members 50,000

What amount should be classified as program services cost in the society’s activity statement?
a. P100,000 c. P160,000
b. P150,000 d. P280,000

49. On March 30, 2020, Don Facundo, a graduate of UST established a permanent trust fund and
appointed the PNB as the trustee. The income from the trust fund is to be paid to UST and used only
by the school to support student scholarships. What entry is required on Ateneo’s books to record the
receipt of cash from the interest on the trust fund.
a. Dr. Cash and Cr. Restricted Current Funds Deferred Revenues
b. Dr. Cash and Cr. Restricted Endowment Revenue
c. Debit Cash and Cr. Endowment Fund Balance
d. Dr. cash and Cr. Unrestricted Endowment Revenues

GOVT ACCTG
50. Which of the following statements is correct regarding the Fundamental Principles for
Disbursement of Public Funds under P.D. No. 1445?
a. No money shall be paid out of any public treasury or depository except through the
issuance of Modified Disbursement System Checks.
b. Generally accepted principles and practices of accounting as well as of sound management and
fiscal administration shall be observed and shall be presumed to have higher authority in cases
where these principles conflict with the law.
c. Trust funds shall be available and may be spent only for the specific purpose for which the
trust was created or the funds received.
d. All disbursements or dispositions of government funds or property shall invariably bear the
approval of the COA.

51. Which of the following transactions is not recorded through a credit to the “Cash-Modified
Disbursement System (MDS), Regular” account?
a. Reversion of unused NCA at the end of the period.
b. Payment of accounts payable wherein the tax portion is withheld.
c. Granting of cash advance for payroll.
d. Constructive remittance of taxes withheld to the BIR.

HOBA
52. When an expense is allocated by the branch to the home office, which of the following entry is
incorrect?
a. The branch will debit expense account in its book
b. The home office will credit Investment in branch account
c. The branch will debit Home Office account
d. The home office will debit expense account in its book

53. In preparing the financial statements of the home office and its various branches:
a. Nonreciprocal accounts are eliminated but reciprocal accounts are combines
b. Both reciprocal and nonreciprocal accounts are eliminated
c. Both reciprocal and nonreciprocal accounts are combines
d. Reciprocals accounts are eliminated and nonreciprocal are combines

54. In accounting for branch transactions, it is improper for the home office to:
a. Credit cash received from a branch to the Investment in Branch ledger account.
b. Maintain Common Stock and Retained Earnings ledger accounts for only the home
office.
c. Debit shipments of merchandise to the branch from the home office to the
Investment in Branch ledger account.
d. Credit shipments of merchandise to the branch to the Sales ledger account.
55. Luzon Corporation starts a branch operation in a nearby town. Merchandise costing P80,000 is
shipped to this branch along with equipment costing P50,000. During the initial year, the home office
assigns P8,000 in expenses to the branch. The branch sells 70 percent of the inventory that is

11 | P a g e RFERRER/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

received for P80,000 and remits P40,000 in cash to the home office. What is the correct Home Office
account balance on the records of the branch? Closing entries have not been made.
a. P 98,000
b. P104,000
c. P122,000
d. P178,000
56. On June 1, 2013, Makati Company established a sales agency in Fairview, Quezon City. Upon the
establishment of the sales agency the Makati office sent merchandise samples costing P8,000 and a
cash working fund of P3,000 to be maintained on the imprest basis. During the month of June, the
sales agency reported to the home office sales orders. These were billed at P70,000 of which P40,000
was collected. The sales agency paid expenses of P2,800 but was reimbursed by the home office.

On June 30, 2013, the sales agency samples were valued at P6,000. It was estimated that the
gross profit on goods shipped to fill agency sales orders averaged 40%of cost. What is the net
income of the sales agency for the month ended June 30,2013?
a. P10,000
b. P15,200
c. P10,000
d. P23,200
57. Just before the books are closed on December 31,2012, the trial balances for the home office and
branch contained the following account balances:

Investment in branch P 38,600

Home office 21,320

Your examination of the accounts revealed the following information:

 On December 26, the branch remitted P10,400 in cash to the home office that was not
received until January 3.
 Merchandise that was billed to the branch at P7,280 was in transit at December 31.
 A cash payment of P400 on an open accounts receivable was received by the home office.
The account, however, was carried on the books of the branch, the home office did not
notify the branch of the cash collection.

What is the adjusted balance of the reciprocal accounts on December 31, 2013?
a. P29,000
b. P49,000
c. P39,000
d. P28,200

58. A parent regularly sells inventory items to its subsidiary above cost. The amount of unrealized profit
in the ending inventory is obtained by multiplying the:
a. Subsidiary’s ending inventory by the parent’s gross profit rate on sales.
b. Subsidiary’s ending inventory by the subsidiary’s gross profit rate on sales.
c. Parent’s ending inventory by the subsidiary’s gross profit rate on sales.
d. Parent’s ending inventory by the parent’s gross profit rate on sales.

59. The non-controlling interest in consolidated income when the selling affiliate is an 80% owned
subsidiary is calculated by multiplying the non-controlling minority ownership percentage by the
subsidiary’s reported net income
a. plus unrealized profit in ending inventory less unrealized profit in beginning
inventory.
b. plus realized profit in ending inventory less realized profit in beginning inventory.
c. less unrealized profit in ending inventory plus realized profit in beginning inventory
d. less realized profit in ending inventory plus realized profit in beginning inventory.

60. Santos Company, a 75%-owned subsidiary of Pardo Corporation, sell inventory items to its parent at
125% of cost. Inventories of the two affiliated companies for 2013 are as follows:

Pardo Santos
Beginning inventory P400,000 P250,000
Ending inventory 500,000 200,000
Pardo’s beginning and ending inventories include merchandise acquired from Santos of P
150,000 and P 200,000, respectively. If Santos reports CI of P 300,000 for 2013, Pardo’s
investment income under the equity method will be:
a. P195,000
b. P255,000
c. P215,000
d. P217,500

12 | P a g e RFERRER/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

61. Several years ago Pip Company acquired 70% of Sol Company at book value. Relevant data for 2013
are as follows:
Pip Sol
CI from its own operations P400,000 P250,000
Dividends declared and paid 2013 270,000 110,000
Merchandise from Intercompany sales
in Pip’s inventory :
January 1, 2013 40,000
December 31, 2013 70,000
Gross profit rate on sales:
2012 70% 40%
2013 75% 30%

Consolidation CI for 2013 is:

a. P645,000
b. P625,000
c. P517,000
d. P571,500

62. In 2004, Parrot Company sold land to its subsidiary, Tree Corporation, for P 24,000. It had a book
value of P 20,000. In the next year, Tree sold the land for P 36,000 to an unaffiliated firm.
Which of the following is correct?
a. No consolidation working paper entry was necessary in 2004.
b. A consolidation working paper entry was required only if the subsidiary was less than
100% owned in 2004.
c. A consolidation working paper entry is required each year until the land is sold
outside the related parties.
d. A consolidated working paper entry was required only if the land was held for resale
in 2004.
63. In reference to the downstream or upstream sale of depreciable assets, which of the following
statements is correct?
a. Upstream sales from the subsidiary to the parent company always result in
unrealized gains or losses.
b. The initial effect of unrealized gains and losses from downstream sales of depreciable
assets is different from the sale of non-depreciable assets.
c. Gains, but not losses, appear in the parent-company accounts in the year of sale and
must be eliminated by the parent company in determining its investment income
under the equity method of accounting.
d. Gains and losses appear in the parent-company accounts in the year of sale and
must be eliminated by the parent company in determining its investment income
under the equity method of accounting.

64. Falcon Corporation sold equipment to its 80%-owned subsidiary, Rodent Corp., on January 1,
2005. Falcon sold the equipment for $110,000 when its book value was $85,000 and it had a 5-year
remaining useful life with no expected salvage value. Separate balance sheets for Falcon and Rodent
included the following equipment and accumulated depreciation amounts on December 31, 2005:

Falcon Rodent
Equipment $750,000 $300,000
Less: Accumulated depreciation (200,000) ( 50,000)
Equipment-net $550,000 $250,000
Consolidated amounts for equipment and accumulated depreciation at December 31, 2005 were
respectively,
a. $1,025,000 and $245,000
b. $1,025,000 and $250,000.
c. $1,050,000 and $245,000.
d. $1,050,000 and $250,000.
65. Pied Imperial-Pigeon Corporation acquired a 90% interest in Offshore Corporation in 2003 when
Offshore’ book values were equivalent to fair values. Offshore sold equipment with a book value of
$80,000 to pied Imperial-Pigeon for $130,000on January 1, 2005. Pied Imperial-Pigeon is fully
depreciating the equipment over 4-year period by using the straight-line method. Offshore’ reported
net income for 2005 was $320,000. Pied Imperial-Pigeon’s 2005 net income from Offshore was
a. $249,250
b. $250,500
c. $254,250
d. $288,000

13 | P a g e RFERRER/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

66. Several years ago Parent Corporation acquired 80% of Sub Co. Analysis of data relative to this
purchase indicates that goodwill of P 60,000 was acquired in this purchase.

On October 1, 2012, Sub sold to Parent a used car for P 32,000 in cash. Sub had originally
paid P55,000 for the car: on the day of the sale, the car had a book value of P 23,000. Parent
estimated the remaining life of the car at 3 years.
Parent’s CI from its own operations was P 100,000 in 2012 and P 120,000 in 2013. Sub’s CI
was P 60,000 in 2012 and P 75,000 in 2013.
Consolidated CI attributable to parent for 2012 and 2013 are:

a. P 138,000 and P 179,400, respectively

b. P 138,400 and P 195,000, respectively
c. P 138,000 and P 179,000, respectively
d. P 141,400 and P 182,400, respectively
67. Which of the following statements are true when comparing corporation and partnership?
a. Partnership entities provide for taxes at the same rates used by corporations.
b. In theory, partnerships are more able to attract capital.
c. Like corporations, partnerships have an infinite life.
d. Unlike shareholders, general partners may have liability beyond their capital
balances

68. A partnership is formed by two individuals who were previously sole proprietors. Property other than
cash that is part of the initial investment in the partnership is recorded for financial accounting
purposes at the:
a. Proprietors’ book value or the fair value of the property at the date of the investment,
whichever is higher.
b. Proprietors’ book values or the fair value of the property at the date of investment,
whichever is lower
c. Proprietors’ book values of the property at the date of the investment
d. Fair value of the property at the date of the investment

69. Maria and Nora entered into a partnership on March 01, 2013, by investing the following assets:

Maria Nora
Cash P 60,000 P -
Merchandise inventory 180,000
Computer Equipment 320,000
Furniture and Fixture 400,000

The agreement between Maria and Nora provides that profits and losses are to be divided into
40% to Maria and 60% to Nora and that the partnership is to assume liability on the
computer equipment of P120,000. The partners further agree that Nora is to receive a capital
credit equal to her profit and loss ratio. How much cash is to be invested by Nora?

a. P270,000
b. P290,000
c. P310,000
d. P260,000

70. On September 30, 2013, Lopez admitted Mendez for an interest in his business. On this date, Lopez's
capital account shows a balance of P316,800. The following were agreed upon before the formation of
the partnership:

1. Prepaid expenses of P35,000 and accrued expenses of P10,000 are to be recognized.

2. 5% of the outstanding accounts receivable of Lopez amounting to P200,000 is to be
recognized as uncollectible.
3. Mendez is to be credited with one-third of interest in the partnership and is to invest cash
aside from the P100,000 worth of merchandise.
The amount of cash to be invested by Mendez and the total capital of the partnership are:
a. P 65,900 and P497,700, respectively
b. P110,600 and P442,400 respectively
c. P165,900 and P497,700 respectively
d. P 65,900 and P342,400 respectively

14 | P a g e RFERRER/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

71. On July 1 of the current year, JJ and GG form a partnership. JJ is to invest certain business assets
at values which are yet to be agreed upon. He is to transfer his business liabilities and is to
contribute sufficient cash to bring his total capital to P180,000, which is 60% of the capital as had
been agreed upon. Details regarding the book values of JJ’s business assets and liabilities and their
corresponding valuation follow:

Book values Agreed valuations

Accounts receivable P 108,000 P 108,000
Allowance for doubtful account 7,200 12,000
Merchandise inventory 193,200 210,000
Store equipment 54,000
Accumulated depreciation-Store equipment 36,000 16,400
Office equipment 36,000
Accumulated depreciation-Office equipment 19,200 9,600
Accounts payable 96,000 96,000

GG agrees to invest cash of P60,000 and merchandised valued at current market price.
The value of the merchandise to be invested by GG is
a. P240,000
b. P420,000
c. P210,000
d. P 180,000
72. A partnership agreements class for allocation of profits and losses by salary allocations, A bonus
allocation, interest on capital, with any remainder to be allocated by present ratio. If a partnership
has a loss to allocate, generally which of the following procedures would be applied?
a. Any loss would be allocated equally to all partners.
b. Any salary allocation criteria would not be used.
c. The bonus criteria would not be used.
d. The loss would be allocated using the profit and loss ratios, only.

73. Which of the following is not a requisites prescribed by law in order that a partnership may be held
liable to a third party for the acts of one of its partners?
a. The partner must have the authority to bind the partnership.
b. The contract must be in the partnership name or for its account.
c. The partner must act on behalf of the partnership.
d. The partner binds the partnership by acquiescence for obligations he may have
contracted in good faith.

74. The partnership contract of he JJ,KK, and LL Partnership provided for the division of net income or
losses in the following manner:

1. Bonus of 20% of income before bonus to JJ.

2. Interest at 15% on average capital account balances to each partner.
3. Remaining income or loss, equally to each partner

Net income of the JJ, KK, and LL Partnership for 2013 was P180,000, and the average capital
account balances for that year were JJ, P 200,000; KK, P400,000; and LL, P600,000

How much of the P180,000 partnership profit for 2013 should be distributed to JJ?
a. P54,000
b. P12,000
c. P66,000
d. P78,000
75. Castillo, Labasan and Hollanes are partners with average capital balances during 2018 of P 945,000,
P 477,300, and P324,700, respectively. The partners receive 10% interest on their average capital
balances; after deducting salaries of P 244,650 to Castillo and P 165,250 to Hollanes, the residual
profits or loss is divided equally.

In 2018, the partnership had a loss of P251,248 before the interest and salaries to partners.
By what amount should Castillo’s and Hollanes’ capital account change increase(decrease)?
Castillo Hollanes
a. P60,534 P(80,896)
b. P58.952 P 35,072
c. P81,688 P 62.470
d. P56,7161 P 64,916

15 | P a g e RFERRER/ATANG/PDEJESUS
 No. 125 Brgy. San Sebastian
Lipa City, Batangas, Philippines
Mobile : 0927 283 8234
Telephone : (043) 723 8412
Gmail : [email protected]

76. A partnership dissolution differs from a liquidation in that

a. Payments are made to creditors before partners receive value.

b. periodic payments to partners are made when cash becomes available.
c. a partner withdraws from the business and the enterprise continues to function.
d. full payment is made to all outside creditors before remaining cash is distributed to
partners in a final lump sum payment.

77. It is the change in the relation of the partners caused by any ceasing to be associated in the carrying
on of the business
a. Dissolution of the partnership
b. Liquidation of the partnership
c. Termination of the partnership
d. Winding up of the partnership

Answer Key:

1. D 11. A 21. D 31. C 41. A 51. D 61. A

2. D 12. A 22. C 32. A 42. B 52. A 62. C

3. A 13. D 23. C 33. A 43. D 53. D 63. D

4. B 14. E 24. C 34. A 44. D 54. D 64. A

5. C 15. B 25. B 35. A 45. D 55. A 65. C

6. A 16. D 26. A 36. A 46. B 56. B 66. D

7. B 17. B 27. B 37. B 47. B 57. D 67. D

8. B 18. B 28. A 38. A 48. B 58. D 68. A

9. A 19. D 29. A 39. D 49. A 59. C 69. C

10. C 20. B 30. B 40. B 50. C 60. D 70. A

71. D
72. C
73. D
74. A
75. A
76. A
77. A

16 | P a g e RFERRER/ATANG/PDEJESUS